November soybeans are trading 8 cents higher near 7:00 am cst. Soybean meal and oil are higher as well. Malaysian Palm Oil prices traded lower overnight on expectations for higher production this month and on rising stocks. There were no soybean or soybean meal deliveries overnight but 398 deliveries of oil were made bringing the total for the month to 7,500. Asian equity markets were generally higher during overnight trading, with the Japanese Nikkei up 1.73% and the Shanghai A Share index up 0.28%. European stock indices are posting moderate gains as well, with the German DAX up 1%. The Dollar is sharply lower, while US stock futures are trading moderately higher going into today's session. The German Constitutional Court gave the go-ahead for that nation to ratify the ESM bailout fund but attached several conditions including a limit on Germany's contribution without further parliamentary approval. Japanese Machinery Orders during July were up 1.7% year-on-year, higher than market forecasts. German CPI during August was up 2.1% year-on-year, in line with expectations. Today's US economic data will include readings on August Import and Export Prices and July Wholesale Inventories. The Federal Reserve's Open Market Committee will begin a two-day meeting this morning.
The results of the USDA Crop Production and supply/demand report will set the tone for the market today. November soybeans recovered some of their losses overnight but was unable to move above yesterday's high, keeping the lower trend intact. Key support levels were tested yesterday but a major trend line drawn from June 4th has been breached which could trigger more liquidation. The market feels heavy going into the report and bullish numbers will be needed to ignite a significant recovery. The market will key on soybean yield and production revisions and most are expecting a soybean yield near 35.7 bushels per acre and production near 2.66 billion bushels. This would be down about 35 million bushels from last month.
Volume in soybeans was 154,120 yesterday with a slight decrease in open interest. Traders continue to take profits and head to the sidelines ahead of this morning's USDA report. Pressure is also coming from low option volatility, weaker cash markets, and a tendency for soybeans to seasonally trend lower from here. Thoughts that China will continue to be a major buyer of US soybeans to finish out this year and into 2013 continue to be supportive to the trade.
Soybean basis is steady to slightly weaker across the US Midwest as soybean harvest approaches and cash traders anticipate an increase in soybean movement. Soybean bids fell 17 cent per bushel to 17 cents under the November contract in Burns Harbor, IN while bids in Decatur, IL were unchanged at 30 cents over the November contract. Mississippi river bids were steady as exporter's ship existing sales but many feel a continuation of the lower price trend could bring new export business. Soybean meal basis also weakened this week which is putting pressure on domestic crush margins. This has also added to the softer tone to soybean bids at processing facilities.
Dry conditions in the central Midwest the next 24 hours should promote good harvest progress. A system of storms is sweeping across Nebraska, Southeastern South Dakota, and Minnesota this morning which may delay harvest for some but no extensive delays are expected. Another round of showers is expected Thursday and Friday for the southern plains and Midwest. Precipitation totals are expected to range from.10-1 inch and the drier conditions that are expected to follow should provide a quick recovery so harvest can resume.
Drier than normal weather conditions in areas of northern and central Brazil have forced farmers to delay soybean planting. Planting can officially begin next Saturday but farmers will wait until rainfall improves soil conditions. Any type of planting delay could push harvest back which may impact shipping logistics in February and March. World importers are counting on South America to be an active seller and shipper of soybeans in this period and delays could move shipments back to the US market.
*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.